Colleges Shifting Aid From Poor to Rich

A new analysis of colleges' financial aid policies indicts American
higher education not just for having turned its back on poor students,
but for robbing them in order to woo rich students.

The report, "Undermining Pell: How Colleges Compete for Wealthy
Students and Leave the Low-Income Behind," was produced by the New
American Foundation, whose chairman is Eric Schmidt, executive
chairman of Google. "Pell" refers to Pell Grants--the federal program
created to help poor students gain access to, and pay for, college.

The report concludes that America's four-year colleges--both private
and public--are "in danger of shutting down what has long been a
pathway to the middle class for low-income and working-class students"
by making financial aid less available to them. Why have colleges done
so? Because, says author Stephen Burd, they are engaged in "a
relentless pursuit of prestige and revenue."

The biggest change over the past 20 years, Burd tells ABC News, has been
the shift from need-based aid to merit-based. That's been driven, he
says, by a variety of factors, including colleges' desire to score
higher in U.S. News's annual ranking of the nation's best colleges,
which is calculated in part on students' academic excellence.

Burd makes his case by examining the "net price" students pay for
college: the amount paid after all grant aid has been exhausted.
Hundreds of colleges, he writes, "now expect the neediest students to
pay an amount that is equal to or even more than their families'
yearly earnings. As a result, these students are left with little
choice but to take on heavy debt loads or to engage in activities that
lessen their likelihood of earning their degrees, such as working
full-time while enrolled or dropping out until they can afford to
return."

When ranked by "net price," the colleges most generous to poor
students are Amherst, Vassar, Grinnell and Williams--all of who accept
a relatively high percentage of Pell Grant students (20 percent or
more) and also provide generous financial aid. Amherst really stands
out: The net price paid by Pell Grant students at Amherst is $448--by
far the lowest in the study's ranking. Amherst's net price compares,
for example, with more than $46,000 paid by students at Santa Clara
University.

ABC News asked Burd to draw a distinction between the change in aid
for poor students with high grades and test scores--the "smart
poor"--and the change in aid available for poor students with inferior
grades and scores.

If you're poor and smart, says Burd, "you're probably in fairly good
shape." The problem for the smart poor, he says, isn't so much that
aid for them has been reduced, it's that they may not know that aid is
available for them at all. They may not think they are eligible to
attend elite colleges.

In other words, colleges are continuing to make aid available to
high-achievers, whether rich or poor. It's poor students with lower
grades who are being offered less financial help.

The group that has benefitted most, according to Burd's analysis, are
rich students with poor grades and scores--the "dumb rich."

"There's a premium, now, on being wealthy," Burd tells ABC, "because a
student's being able to pay full tuition is good for the bottom line
of schools. Studies have found that the wealthy who are low achievers
sometimes do better [in terms of getting aid] than high-achieving,
low-income students, though I don't go into that in my paper."

It's especially true, he says, in public colleges now looking for
alternative sources of funding--e.g., students from out of state whose
grades may be lower than in-state students, but who can pay higher
tuition.